Facebook an enormous competitor, Commerce Commission conference into proposed NZME/Fairfax media merger hears

NZME CEO Michael Boggs speaks at the Commerce Commission hearing on the merger of NZME and Fairfax. Photo / Marty Melville

Distinctions between traditional print and broadcast media are rapidly breaking down and media companies in New Zealand are competing with Facebook as much as each other, the Commerce Commission has been told.

The commission is holding a public conference at its Wellington offices to hear submissions on the proposed merger of NZME/Fairfax.

Those companies are New Zealand's two largest newspaper and online news publishers, with major brands including the New Zealand Herald, nzherald.co.nz, the Stuff website, and regional newspapers.

This morning's discussion concerns online news and readership.

The commission's view is the merger would substantially lessen competition in the market for online news.

Shayne Currie, managing editor of Herald publisher NZME is on a panel of editors and media experts, and said competitors such as TVNZ and RNZ were seeing strong growth in online news.

Currie said no media organisation could be defined by one platform anymore, the result of a "massively changing landscape in New Zealand media" that was changing how journalists operated.

NZME journalists were now given iPhone 6s and used an app to shoot and edit video while out in the field, which then ran with radio or print copy.

Currie cited the fact that John Campbell's show on RNZ was now broadcast live on video, and that former Herald political columnist John Armstrong was now writing a column for 1 News.

Sinead Boucher, executive editor for Fairfax, told the commission that barrier entries in New Zealand were low, and said The Spinoff website now had more than 500,000 users:

"That is a quarter of Stuff's traffic within a year or so [of] growth".

Asked if NZME was Fairfax's main competitor, Boucher said they were not the only benchmark "by any stretch", with other organisations like TVNZ providing strong competition, as well as bloggers and commentators.

"Production of stories is only one facet of how we compete. Facebook is an enormous competitor - they are editors and curators of the world's news feed these days. They can control how people see that and what news they are exposed to. We have seen that in recent times with the US election - they have come under a lot of criticism [about the spread of fake news]."

The Commerce Commission last month issued a draft determination rejecting the proposed merger on the basis it would threaten the range of voices, opinions and issues that the news media might cover, therefore producing an outcome not in the public interest.

The commission's preliminary view was that a merger of the media companies would substantially lessen competition in a number of markets, including premium digital advertising, and Sunday and community newspaper advertising.

In submissions at the end of last month, NZME and Fairfax countered by saying it was not the commission's role to make decisions on "unquantifiable media plurality grounds".

NZME and Fairfax submitted that significant competition and plurality existed in news media beyond the parties in the form of other "traditional" news businesses such as TVNZ, MediaWorks, RNZ, and others.

In addition, any barriers to entry and expansion have been lowered by distribution platforms such as Facebook and Google, they said.

NZ Herald Editor Shayne Currie speaks at the Commerce Commission hearing. Photo / Marty Melvill

"The most likely outcome in the absence of a merger is that the parties would each be forced to significantly reduce their investment in frontline journalism in the short to medium term, and this would result in a loss of plurality, particularly as these cutbacks would impact 'niche' areas including regional and community reporting," they said.

The Commission's final decision is expected in March next year.

Last month, 30 editors at NZME and Fairfax signed an open letter to the commission stating their "deep concern" rejecting the merger will "inevitably spell the end of our ability to maintain quality national and local journalism at scale for New Zealanders".

A group of 11 senior journalists, including former Herald editor Gavin Ellis and former Sunday Star-Times editor Suzanne Chetwin submitted to the commission that an already shallow media pool must not be diminished. Their submission said New Zealand already suffered from a "dearth of serious content and analysis".

Facebook "world's most powerful editor"

On Facebook, Currie said Mark Zuckerberg was "by far the world's most powerful editor".

Facebook published content from news organisations in such a way that Facebook held all the data on those readers, Currie said, and that was used to hone its algorithms.

The "big goal" was to keep readers within Facebook rather than feed them out to news organisations, he said.

"It is a phenomenal beast and it is absolutely, 100 per cent our main competitor and constraint."

Commissioner Begg asked if competition with Facebook and content on it "would drive you to have more cat videos on your websites to compete with what's being served up on Facebook?"

Currie cited a recent Herald investigation into the hair trade in China that took months to complete, and said every editor in the country was striving to produce quality, unique journalism.

"A lot of people's views of the quality of journalism in this country comes down to the first 12 stories on a homepage and what might be coming through on Facebook - that is like an iceberg, it is the 10 per cent of what lies beneath which is the 90 per cent of other great content.

"But people talk about cat videos because that's what they click on, unfortunately."
Begg asked if unique product was not driven by competitors. "Is this just something journalists like to do?"

Currie said it was, and competition existed within newsrooms.

'Digital first' approach 'very difficult'

Counsel for TVNZ and Mediaworks told the panel that they did not consider themselves to be able to be a competitive constraint to the proposed merged company.

Alex Nicholson, corporate counsel for Mediaworks, said although everyone in the industry now accepted the "digital first" approach, in reality it was very difficult to go from a broadcast company to a digital news one.

Companies like NZME and Fairfax that came from a newspaper background had a sizeable head start, Nicholson said, and people used to writing for TV or radio had a significantly different skill set.

Asked by commissioner Sue Begg about the reality of catching up in digital news with NZME and Fairfax, Nicholson said "that would be lovely" but wasn't likely to happen anytime soon.

Ross Patterson, lawyer at MinterEllisonRuddWatts and acting for TVNZ, said they would submit in private to the commission to show the organisation wouldn't be a competitive constraint on a merged entity.

Boucher countered by saying TVNZ demonstrated during the recent Kaikoura earthquakes that they could produce more video content - and that was the area that all companies were now focussed on as it brought in the most revenue.

Many stories on the Guardian website were now written by New Zealand-based journalists, and The Spinoff's growth showed barriers were low.